Low value and hard to stack: Opportunity zones and the low-income housing tax credit

Established in 2017, Opportunity Zones (OZs) promised to spur investment in undercapitalized communities. Early evaluations find that OZs have had nominal effects on employment and real estate outcomes. Distressed community development, however, has historically been driven by affordable housing production. Conceptually, developers can stack OZs with the Low-Income Housing Tax Credit (LIHTC), the nation's largest program for affordable housing. Therefore, this study seeks to estimate whether OZs have increased affordable housing production. First, we scan press announcements and OZ-tracking websites through July 2022 to document evidence of OZ-financed affordable housing. Second, we use a difference-in-differences approach to compare LIHTC outcomes through 2018 in OZs with areas that were OZ-eligible but not designated. We find only 60 examples of OZs supporting affordable housing projects across the country. We also find that OZs do not have statistically significant effects on LIHTC outcomes. We document findings from 16 interviews conducted in 2019 and 2020 to contextualize why OZs are failing to stimulate affordable housing production. In conclusion, we discuss how OZs could be modified to better encourage affordable housing, but we also reflect on whether such modifications would be desirable for goals of efficiency and distressed community development.